Modeling the Unthinkable: Sustained Strait Closure
As the Strait of Hormuz crisis enters its fourth day with no diplomatic resolution in sight, energy market analysts are increasingly turning their attention to a scenario that was once considered a theoretical extreme—sustained closure of the world's most critical oil transit chokepoint pushing Brent crude above $100 per barrel. While oil prices have already surged past $82, the market has not yet fully priced in the possibility that the closure could persist for weeks or even months. Analysts at UBP, Goldman Sachs, JPMorgan, and several independent energy consultancies have published scenario analyses that paint a sobering picture of the cascading economic consequences if the strait remains blocked.
The Strait of Hormuz handles approximately 21 million barrels per day of crude oil, representing roughly 21 percent of global petroleum consumption. An additional 4 million barrels per day of refined products and approximately 14 billion cubic feet per day of liquefied natural gas also transit the strait. No other single point in the global energy supply chain concentrates such an enormous volume of diverse energy flows, making the Hormuz chokepoint uniquely consequential for global economic stability.
Price Trajectory Under Extended Closure
Goldman Sachs commodity strategists have modeled three scenarios for the oil price trajectory. In their base case, which assumes the closure lasts 7 to 14 days before a diplomatic or military resolution restores limited transit, Brent crude peaks at $90 to $95 per barrel before gradually declining. In their adverse scenario, assuming a 30-day closure, Brent reaches $110 to $120 as strategic petroleum reserve drawdowns prove insufficient to offset the supply deficit. In their extreme scenario—a closure lasting 60 days or more—the models suggest prices could spike above $150 per barrel as physical supply shortages materialize in importing nations.
JPMorgan's energy team has reached broadly similar conclusions, noting that the global oil market currently operates with a spare production capacity cushion of approximately 4 to 5 million barrels per day, held primarily by Saudi Arabia and the UAE. However, this spare capacity is largely meaningless if the crude oil cannot physically leave the Gulf region. Saudi Arabia's East-West Pipeline to Yanbu on the Red Sea coast can redirect approximately 5 million barrels per day, but this capacity is insufficient to offset the full 21 million barrels per day that normally transit the strait, and the Red Sea route itself faces security concerns from Houthi forces.
Beyond Oil: LNG, Fertilizer, and Petrochemical Impacts
The $100 oil scenario extends far beyond crude markets. Qatar, the world's largest LNG exporter, ships approximately 80 million tonnes per year of liquefied natural gas through the strait—virtually its entire export volume. A prolonged Hormuz closure would create acute LNG supply shortages in Asia and Europe, where spot LNG prices have already surged above $18 per MMBtu. Under extended closure scenarios, European gas storage drawdown rates would accelerate dramatically, potentially pushing the continent toward the kind of energy rationing that was narrowly avoided during the winter of 2022-2023.
The fertilizer market faces its own crisis. Approximately one-third of global seaborne fertilizer trade passes through the Strait of Hormuz, with major export facilities in Saudi Arabia and the UAE shipping urea, ammonia, and other nitrogen-based fertilizers to agricultural markets across Asia, Africa, and Latin America. A sustained disruption to these flows during the Northern Hemisphere spring planting season could have severe consequences for global food security, as farmers facing fertilizer shortages would be forced to reduce application rates or switch to lower-yielding cultivation methods.
Petrochemical markets are equally vulnerable. The Gulf region is home to some of the world's largest ethylene, polyethylene, and polypropylene production complexes, and their products serve as feedstocks for manufacturing industries worldwide. A sustained supply disruption would ripple through global manufacturing supply chains, affecting everything from automotive production to medical device manufacturing to consumer packaging.
Macroeconomic Consequences
The International Monetary Fund estimates that every $10 per barrel increase in the sustained oil price reduces global GDP growth by approximately 0.2 percentage points. Under the $100 oil scenario, the cumulative economic drag could shave 0.4 to 0.8 percentage points from global growth—the difference between a healthy expansion and potential recession for several major economies that are already growing below trend.
Central banks face an agonizing policy dilemma. The Federal Reserve, European Central Bank, and Bank of England have been navigating a delicate path toward interest rate normalization following the post-pandemic inflation surge. A sustained oil price spike would reignite inflationary pressures through both direct energy costs and second-round effects on transportation, manufacturing, and food prices. Central bankers would be forced to choose between maintaining anti-inflation credibility by keeping rates elevated and supporting economic growth by cutting rates—a lose-lose scenario reminiscent of the stagflation dynamics of the 1970s oil shocks.
Emerging market economies that are net energy importers face the most severe consequences. India, which imports approximately 85 percent of its crude oil requirements, would see its current account deficit widen dramatically under the $100 oil scenario. Turkey, Pakistan, Bangladesh, and several East African nations that are heavily dependent on Gulf energy imports face similar pressures, with potential implications for currency stability, fiscal balances, and social stability in countries where energy costs represent a large share of household expenditure.
The Recovery Timeline
Even after the strait eventually reopens, energy market analysts warn that the recovery to pre-crisis normality will be protracted. The simultaneous departure of hundreds of stranded tankers will create logistical bottlenecks at the strait itself and at discharge terminals worldwide. Strategic petroleum reserves that have been drawn down will need to be replenished, adding demand pressure to markets even as the immediate crisis abates. And the insurance market's reluctance to restore pre-crisis pricing will ensure that the cost of Gulf trading remains elevated for months after the physical blockade ends, acting as a persistent drag on the normalization of energy trade flows.
